Unions for more than half of the
workers bargaining with the largest U.S. freight railroads have
reached agreements, reducing the threat of a walkout that might
cost the economy $2 billion a day.

“A strike is unlikely,” said Christian Wetherbee, an
analyst at Citigroup Global Markets Inc. in New York. “The more
that you get to sign up for an agreement, the more likely that
you end up with a resolution” by the deadline.

Four more unions have made deals, bringing the total to 10,
the National Railway Labor Conference, which represents the
railroads, said yesterday. The accords, which cover about 60
percent of the 132,000 employees in negotiations, implement
recommendations of a panel appointed by President Barack Obama,
the rail group said, without disclosing details.

If the rail operators and the remaining three unions don’t
reach agreements during a 30-day “cooling off” period that
ends Dec. 6, the workers are permitted to strike under the
Railway Labor Act and the railroads can lock them out. More than
30 railroads, including Union Pacific Corp. (UNP) and Warren Buffett’s
Burlington Northern Santa Fe, are involved in the talks.

The Presidential Emergency Board’s proposals are aimed at
preventing a walkout, which the Association of American
Railroads said would cost the U.S. economy as much as $2 billion
a day. Before the government review, the companies had ratified
an agreement with the United Transportation Union and its
yardmasters division, which represent almost 40,000 employees.

Congressional Role

Congress probably would legislate a contract similar to the
presidential board’s recommendations if rail workers went on
strike, Wetherbee said. Such legislation was passed in 1 1/2
days during the last rail walkout, he said.

“There’s more risk to them by going in front of Congress
than to actually signing this deal,” Wetherbee said.

Obama’s board recommended an 18.6 percent pay increase over
six years. That compares with the 19 percent raise over five
years sought by unions and the carriers’ offer of 17 percent
over six years.

The agreements announced yesterday involve the
International Brotherhood of Boilermakers, Blacksmiths, Iron
Ship Builders, Forgers and Helpers; the Sheet Metal Workers’
International Association; the National Conference of Firemen &
Oilers; and the Brotherhood of Railroad Signalmen.

“You have two big ones out there,” said Tony Hatch, an
independent railroad analyst in New York. “Those are the ones
that if they strike, will shut the railroads down.”

A strike might have a bigger effect than usual because
consumers may have delayed holiday purchases, meaning railroads
may carry more freight than normal in December, Hatch said.

In previous years, a strike at that time “would’ve been
after the money is made,” he said. “Now the money is still
going to be being made then.”

Hatch said any potential strike still isn’t a reason to buy
or sell railroad shares.

Shippers haven’t shifted business to trucks amid concern
that a strike would reduce ability to move goods by rail, said
Wetherbee. He has a “buy” rating on Union Pacific, CSX Corp. (CSX)
and Norfolk Southern Corp. (NSC), the three biggest publicly traded
U.S. railroads. Wetherbee said the labor talks haven’t affected
his outlook on the companies.